ICG Enterprise Trust: Investor Day – defensive growth in practice

ICG Enterprise Trust plc (LON:ICGT) hosted an Investor Day on 13 June 2023. The key takeaways were i) a clear, defensive-growth investment strategy, targeting superior risk-adjusted returns over the long term, ii) a differentiated portfolio with exposure to profitable, cash-generative businesses with downside resilience, iii) the benefits of having a dedicated investment team focused exclusively on the trust, but leveraging Intermediate Capital (ICG) as the manager, and iv) a disciplined approach to capital allocation with shareholder distributions through dividends and buybacks. The 1Q trading update noted a small fall in NAV (forex-driven), with the underlying portfolio value growing 10.2% over the past 12 months in constant currency.

  • ICGT’s investment approach: We believe investors get a good understanding of the differentiated approach from slides 26-40 of the Investor Day presentation. They detailed the benefits of Intermediate Capital as the manager, how ICGT accesses the market, and why it is in mid-large, developed-market buyouts with top-tier managers.
  • Results: In our note, FY results: proving the market-beating model again, we reviewed ICG Enterprise Trust’s latest results. The NAV total return was 14.5% (local currency portfolio return 10.5%, the 14th consecutive year of 10%+ growth). On exit, it saw 24% uplifts. Realisations/investments were in line with historical averages.
  • Valuation: ICGT’s NAV valuations are conservative, demonstrated by continued realisations above reported book values. The ratings are undemanding. The 41% discount to NAV is anomalous, we believe, with defensive, market-beating returns, and is above the levels seen pre-COVID-19. The 2024E yield is 3.0%.
  • Risks: PE is an above-average cost model, but post-expense returns have consistently beaten public markets. Actual experience has been of continued NAV outperformance in economic downturns, but sentiment may be adverse. ICGT’s permanent capital structure is right for unquoted/illiquid assets.
  • Investment summary: ICG Enterprise Trust has consistently generated superior returns, by adding value in an attractive market, having a strategic focus on defensive growth and leveraging synergies from being part of ICG since 2016. Valuations appear conservative, and governance is strong. ICGT focuses on delivering resilient, risk-adjusted returns, and balancing risk and reward. The risks are primarily sentiment-driven on costs, cyclicality and the underlying assets’ liquidity. A 41% discount to NAV appears anomalous with ICGT’s performance.
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